D&O Loans: California Section 315 Versus Sarbanes-Oxley Section 402

Although both Section 315 of the California Corporations Code and Section 402 of the Sarbanes-Oxley Act purport to ban loans to directors and officers, there are significant differences between these statutes.  Below is a precis of some of the key differences. Companies covered.  Section 315 applies to corporations.  The California General Corporation Law (GCL) defines “corporation” as only a

California’s D&O Loan Ban And Advancement Of Expenses

Yesterday’s post outlined the general scope of the ban on loans to directors and officers found in Section 315 of the California Corporations Code.  Because Section 315 doesn’t define “loan”, it may not always be clear whether an arrangement is a verboten loan.  Fortunately, no time need be wasted on the question of routine travel and

California’s Ban On Loans To Directors And Officers

California banned loans to directors and officers decades before Congress thought of doing so as part of the Sarbanes-Oxley Act of 2002.  Current Corporations Code Section 315 prohibits corporations (defined in Section 162) from making loans of money or property to, or guaranteeing the obligations of, any director or officer of the corporation or its parent.  However, the

Court Rules Board Of Directors Is Incapable Of Being Sued

Plaintiffs sue corporations and they sue individual members of the boards of directors, but can a plaintiff sue a board of directors as a body? That was the question in Theta Chi Fraternity, Inc. v. Leland Stanford Junior Univ., 2016 U.S. Dist. LEXIS 116863 (N.D. Cal. Aug. 30, 2016).  The case itself involved a national fraternity’s

Three Considerations For Drafting A Code of Business Conduct

Although the Securities and Exchange Commission does not require that a company adopt a code of business conduct and ethics, I would be very surprised to hear of an SEC reporting company that has not adopted such a code.  Item 406 of Regulation S-K requires a reporting company to disclose whether it has “adopted a code of ethics

Are Alternate Committee Members “Then Serving”?

A number of amendments to Delaware’s General Corporation Law took effect at the beginning of this month.  One of these changes was to establish a default quorum requirement for meetings of committees of corporate boards of directors.  New Section 141(c)(4) provides: A majority of the directors then serving on a committee of the board of

Who Signs The Bylaws?

I am occasionally asked who should sign the bylaws.  The question presumes that bylaws must be signed.  Although the California General Corporation Law requires that the original or a copy of the bylaws be available to shareholders (Section 213), it does not require that corporate bylaws be signed.  Indeed, it could be argued that the

Replacement Of Lost Stock Certificate Is Not An Internal Affair, But So What?

U.S. District Court Judge Edward M. Chen recently ruled that a stockholder could maintain an action under California Corporations Code Section 419 for replacement of a lost, stolen or destroyed certificate.  As just described, the ruling shouldn’t be a surprise.  Section 419 provides that if “a corporation refuses to issue a new share certificate or other certificate in

Suspended And Dissolved Corporation Still Defaulted

The story is straightforward; the legal ramifications are not: The plaintiff sued a corporation.  Before the lawsuit was filed, the Secretary of State had suspended the corporation and then the corporation was voluntarily dissolved.  The plaintiff effected service on the designated agent who happened to be an attorney.  The attorney didn’t notify either his erstwhile client

California, Delaware And Nevada Differ On Committee Composition

In this prior post, I compared the differing limitations on committee authority under California and Delaware law.  Today’s post focuses on differences in committee composition among California, Delaware and Nevada.  These are summarized in the chart below.  In this post, I’m referring to committees of the board of directors; these are committees that have the power to